New Foreign Qualification Requirement

Colorado now requires all charitable organizations registered or preparing to register to solicit charitable contributions in Colorado that are incorporated in a state other than Colorado to obtain a Statement of Foreign Entity Authority (foreign qualification to transact business or conduct activities in the state). This foreign qualification must be in place before the organization’s charitable solicitation registration or renewal will be approved. While this requirement has been statutorily required for many years (see CO Rev. Stat. § 7-90-801(5)), Colorado is only now beginning to actively enforce it.

If the organization is legally formed in a jurisdiction other than Colorado and is currently registered—or plans to register—to solicit charitable contributions in the state, it must complete the foreign qualification process first. 

New Registered Agent Requirement 

As a prerequisite for obtaining a foreign qualification, Colorado requires the appointment of a registered agent with a physical address in Colorado.  The registered agent may be an individual Colorado resident or a commercial registered agent service.

Certificate of Good Standing 

Although Colorado’s foreign qualification filing process does not require submission of a Certificate of Good Standing (also called a Certificate of Existence), all organizations must be in good standing in their home state to obtain a foreign qualification in Colorado. Good standing means (1) the organization has met its state filing obligations (such as filing of annual reports) in its state of incorporation and (2) the organization’s state of incorporation has not suspended, dissolved, or revoked the organization’s legal status. Accordingly, the organization should take steps to confirm that its home-state status is current and in good standing.

Ongoing Foreign Qualification Compliance: Colorado Periodic Report (annual report)

Once an organization is qualified to transact business in Colorado as a foreign entity, it must file ongoing Periodic Reports with the Secretary of State. This Periodic Report must be filed annually, in addition to the charitable registration renewal. 

State Filing Fees (current published amounts)

Colorado assesses the following filing fees for these required filings:

• Statement of Foreign Entity Authority (foreign qualification – one-time filing fee): $100 
• Periodic Report (annual filing fee): $25 

In practical terms, organizations should treat Colorado charitable solicitation compliance as a two-part filing process: obtain (and maintain) foreign qualification first (including maintaining a registered agent in the state), then proceed with charitable solicitation registration or renewal. Organizations registered to solicit in Colorado should review their current compliance status in the state and be prepared to meet any additional foreign qualification requirements to remain compliant.

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Twenty-six states require fundraising counsel to register prior to providing services. The state’s interest is to protect charitable assets for their intended use and to ensure that donations contributed by state residents are not misapplied through fraud or other means.

Who Qualifies as a Fundraising Counsel?

A fundraising counsel (“FRC”) is generally a person or entity paid to plan, manage, advise, counsel, consult, or prepare materials for, or with respect to, a charitable solicitation. A fundraising counsel does not solicit contributions or have custody of solicited funds.  Most often, an FRC is paid a fixed fee or rate rather than a percentage of contributions collected. Consultants providing services that fit within the definition of a fundraising counsel, but who also solicit contributions, have custody of funds, or are compensated on a percentage basis may be considered “professional fundraisers” under some state laws. Professional fundraisers are subject to greater regulatory obligations, including obtaining bonds and filing detailed reports after each solicitation campaign.

Typically, an FRC provides strategic planning services with the goal of improving a charity’s fundraising activities in order to increase donations. States define “fundraising counsel” broadly, however, and thus FRC services include a variety of activities, such as the following:

• A company hired to design and manage a direct mail campaign
• A company hired to manage an annual fundraising gala
• An individual hired to design a digital fundraising strategy
• A firm hired to develop a major gift or capital campaign strategy
• An individual hired to prepare fundraising materials, including providing advice on how best to use the materials to maximize fundraising results
• An individual hired to coach an organization’s development staff or volunteers who are conducting peer-to-peer fundraising campaigns
• An online fundraising platform that is paid by a charity to help optimize its fundraising efforts. (This might include providing customized advice on how to better use the platform’s tools to maximize the charity’s fundraising success. Since each state has adopted slightly different definitions of “fundraising counsel,” states may reach varying conclusions on a platform’s classification.)

Where Do Fundraising Counsels Need To Register?

The key question in determining whether a fundraising counsel must register is whether sufficient contacts exist between the fundraising counsel and the state such that it is not fundamentally unfair for the state to subject the fundraising counsel to its registration and reporting requirements. The fundraising counsel must purposefully avail itself of the privilege of conducting activities within the state. Several Supreme Court cases have addressed whether a fundraising counsel has enough contact with a state to be subject to its regulatory jurisdiction. Interpretation of these cases suggests the following takeaways:

• Fundraising counsel should register in the state where the charity is located;
• Fundraising counsel may have to register in the state where they are domiciled;
• Fundraising counsel that advise charities with respect to solicitation in particular counties, states or regions or that, in some other way, target a particular state with its fundraising counsel activities should register in the targeted states. For example, a fundraising counsel that, as part of managing a direct mail campaign, recommends specific donor mailing lists, should register in the states where the direct mail recipients reside.

Online fundraising platforms are often structured to avoid classification as a fundraising counsel. Common reasons for falling outside the fundraising counsel definition are either that the online platform is directed at providing technology rather than consulting services, or the platform does provide fundraising counsel services but is also collecting a percentage of funds raised, thereby triggering categorization as a professional fundraiser.

Determining whether an online fundraising platform is classified as fundraising counsel, and if so, where it should register, requires a nuanced analysis that takes into consideration published guidelines for state regulation of online fundraising. A concise analysis of this issue is contained in my colleague Karen Wu’s Nonprofit Times article A Moving Target: The regulation of online fundraising platforms

Fundraising Counsel Contracts

In addition to the registration requirements, state charitable solicitation statutes require that contracts between a charity and a fundraising counsel include certain provisions. Common contract provisions required by state statute including the following:

• Legal name/address of the charity
• Statement of the charitable purpose for which the solicitation campaign is being conducted
• A clear statement of the fees to be paid to the fundraising counsel
• The effective/termination dates of the contract
• A statement that the fundraising counsel will not have control or custody of funds
• A statement that the charity exercises control and approval over the content, volume and/or frequency of any solicitation
• California and New York require lengthy cancellation provisions designed to allow the charity cancel the contract within 10-15 days of signing without penalty
• Several states require the contract to be signed by two authorized officials of the charity

The services fundraising counsel provide can be of great value to nonprofit organizations. Understanding the regulatory framework governing fundraising counsels will help you avoid missteps that can lead to actions by state regulators, including fines and penalties. It is incumbent on both the fundraising counsel and its charity clients to take the steps that ensure compliance under state charitable solicitation laws seriously. If in doubt, it’s always a good idea to seek counsel.

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Attending the annual NAAG/NASCO Charities Conference is the perfect opportunity to understand what truly matters to charity regulators. This yearly event brings together state charity officials and nonprofit leaders to discuss oversight, compliance, and the charitable sector’s overall health. This year’s meeting in Columbus, Ohio, clearly showed that enforcement expectations remain a priority even as nonprofits face unprecedented operational and political challenges. 

The Regulator’s Lens: Practical Duties Over Abstract Ideals

State officials emphasized four key boardroom priorities: (1) act with care, (2) remain committed to the mission, (3) follow governing documents and the law, and (4) manage the organization’s finances responsibly. Regulators look for disciplined decision-making, precise adherence to bylaws and filings, and budgets that align with program objectives. 

This practical approach to compliance also guides how states identify compliance issues. Regulators are increasingly analyzing public IRS data (Form 990s, the Master Business List, and similar sources) to find nonprofits that appear to be operating or soliciting without being properly registered to solicit. If you’re fundraising nationwide, you can assume your filings are being reviewed across jurisdictions and that outreach may occur before any complaints are filed. 

A Sector Under Strain

Conference sessions ranged from fundraising practices, the role of religious organizations, and complex organizational structures. Throughout, the message was clear: charities face a loss of funding, legal and political hurdles to DEI initiatives, and possible threats to their tax-exempt status. Many organizations are responding by refining program design, renegotiating grants, training staff, and adjusting public-facing language to mitigate risks. 

The consensus is that the sector is on the brink of rapid contraction. This means fewer nonprofits, fewer services, and increased pressure on the organizations that do survive. As local and state governments attempt to fill this gap, there will be significant strains on the social safety net. In this environment, some organizations are reducing their strategic planning cycles from years to months as they wait for clearer funding signals. 

Regulatory Enforcement Remains Active

Despite the mounting pressures on the sector, state regulators continue to register charitable organizations, oversee charitable solicitation activities, and protect charitable assets. Recent multi-state enforcement actions, such as the settlement involving Kars-R-Us.com Inc. and its owners alongside 19 states and the FTC, underscore states’ significant effort to engage in coordinated enforcement to prosecute multi-state deceptive fundraising activities. 

What You Can Do Now 

Here are some practical tips to enhance your governance and compliance.

• Conduct a quick governance and filing audit. Ensure that your bylaws and board actions align with the information you report to the IRS and each state. Confirm that your charitable registrations cover the areas where you actually solicit and double-check that your budget accurately reflects your programming mix. These are the first areas regulators will examine—and they’re the easiest places to get right. Please read our article Consider a Nonprofit Legal Audit to learn more.
• Think of your Form 990 as a multi-state postcard. If it indicates activity that suggests solicitation or programs in a state, ensure that your filings and website disclosures are aligned. If you notice a gap, consult an attorney or the relevant office to determine the best course of action to address it. 
• Tighten program and grant documents to address today’s risks. Wherever you use terms that could be read politically or legally (DEI, immigration, safety protocols), define them, tie them to applicable law, and train your staff. Where you rely on partners, embed compliance expectations and reporting in the agreement, but keep it operational rather than aspirational. 
• Keep the language used with your audience straightforward. Public materials should reflect your legal reality: who you are, where you work, what you do, and under what rules. If a sentence makes your general counsel raise an eyebrow, your regulator might raise two.  
• With funding in flux, adopt a rolling three-to-six-month plan that prioritizes core services, documents compliance assumptions, and allows for flexibility and adaptation. That cadence helps boards fulfill their duties without overpromising. 
• If key funding cuts are straining your organization’s financial viability, consider the strategic options to ensure that you can continue providing critical programming to those your organization serves, including a possible merger or similar transaction with an organization providing similar or complementary services. Please read our article The Next Phase – Nonprofit Mergers & Acquisitions to learn more.

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How the New Law Defines a “Foreign Source of Concern”

According to Senate Bill 700, a “foreign source of concern” means any of the following:  

1. The government or any official of the government of a foreign country of concern; 
2. A political party or member of a political party or any subdivision of a political party in a foreign country of concern;
3. A partnership, an association, a corporation, an organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country of concern, or a subsidiary of such entity;
4. Any person who is domiciled in a foreign country of concern and is not a citizen or lawful permanent resident of the United States;
5. An agent, including a subsidiary or an affiliate of a foreign legal entity, acting on behalf of a foreign source of concern; or
6. An entity in which a person, entity, or collection of persons or entities described in paragraphs 1-5 above has a “controlling interest”. ¹

“Foreign countries of concern” are designated as the People’s Republic of China, the Russian Federation, the Islamic Republic of Iran, the Democratic People’s Republic of Korea, the Republic of Cuba, the Venezuelan regime of Nicolás Maduro, or the Syrian Arab Republic, including any agency of or any other entity under significant control of such foreign country of concern. See Fla. Stat. § 286.101(1)(b).

Potential Penalties for Noncompliance

For a first violation of the new law, the Florida Department of Agriculture and Consumer Services (“Department”) will not take punitive action if the charitable organization satisfies all of the following requirements:

1. Provides the Department with a solicitation or contribution form containing an attestation from such foreign source or country of concern in which the person, country, or entity falsely certifies that they are not a foreign country of concern or a foreign source of concern;
2. Provides the Department with a copy of a refund to the foreign source or country of concern within 30 days after notification by the Department of the prohibited act; and
3. Provides the Department with a plan of action to prevent the charitable organization from accepting contributions from a foreign country or source of concern in future solicitation activities.

Note that the requirements to avoid any punitive action on a first violation are so specific that the organization could really only avoid a punitive action by taking proactive steps to implement measures to comply with the new requirements. A second or subsequent violation may lead to additional consequences, including financial penalties and/or cancellation of the organization’s charitable solicitation license. 

Establishment of an “Honest Services Registry”

The law requires the Department to establish a voluntary “Honest Services Registry” accessible on its website. This registry will provide Florida residents “with the information necessary to make an informed choice when deciding which charitable organizations to support.” 

Charitable organizations can be listed on the Honest Services Registry by submitting a form prescribed by the Department with an attestation statement confirming that the organization does not accept or solicit contributions, funding, support, or services from any foreign source of concern, directly or indirectly. The organization must also certify that a foreign source of concern does not influence its messaging and content. 

New Registration Attestation Requirement

Additionally, the law requires charities to include attestations as part of their charitable registration filing in Florida, confirming they are either not involved in state and local election-related activities (including organizations that are prohibited by federal or state law from engaging in such activities) or, if they are engaged in election-related activities that would require registration with the Florida Department of State, that they are properly registered.

Tips for Complying with Senate Bill 700

Organizations should consider taking steps to ensure their compliance with the new requirements in Florida Senate Bill 700, which may include the following:

• Revise your solicitation materials, including disclosures on your organization’s website donate page or third-party fundraising platforms, to include an affirmation statement confirming that the person making a donation is not a foreign source of concern.
• Coordinate with online donation vendors to block contributions originating from addresses in foreign countries of concern.
• Review and return any donations from foreign sources of concern that the organization receives in response to solicitation efforts targeting Florida. 
• Educate your board, fundraising staff and volunteers on the new rules and update your gift acceptance policies accordingly so that everyone involved in fundraising can spot prohibited foreign donors and the proper process for declining or refunding such gifts.

1. The term “controlling interest” means the possession of the power to direct or cause the direction of the management or policies of an entity, whether through ownership of securities, by contract, or otherwise. A person or an entity that directly or indirectly has the right to vote 25 percent or more of the voting interest of the company or is entitled to 25 percent or more of its profits is presumed to possess a controlling interest. ↩︎

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Hawaii’s new law follows California’s 2023 enactment of a similar law regulating charitable fundraising platforms. Hawaii’s decision to enact similar legislation was motivated by concerns about the legitimacy of some online fundraising campaigns to support Maui wildfire relief efforts.  As of now, California and Hawaii are the only states that have enacted legislation specifically aimed at regulating the activities of online platforms that facilitate charitable fundraising.  

The new law defines a “charitable fundraising platform” as “any person that uses the Internet to provide an internet website, service, or other platform to persons in the State, and performs, permits, or otherwise enables acts of solicitation to occur.” This broad definition closely mirrors the one used in California’s law and applies to most websites that facilitate the receipt of online donations, with few exceptions.

It also applies to websites that run multiple promotions, advertising that a portion of the purchase price from the sale of goods or services will be donated to specified charities. It also applies to websites or platforms that voluntarily invite customers to add a donation during the checkout process, or that encourage individuals to take specific actions to trigger donations. 

The bill also regulates platform charities, which are charitable organizations that facilitate acts of solicitation on a charitable fundraising platform.

Key Components of the New Law
As amended, Hawaii’s new law includes the following key components. 

1. Registration & Reporting
Charitable fundraising platforms and platform charities must annually register and submit information to the Attorney General’s office to enable them to ascertain whether charitable funds have been properly solicited, received, held, controlled, or distributed. This includes information on the number of donations made, the amount raised, the length of time for distributing donations or grants of recommended donations, fees charged by or through a charitable fundraising platform or platform charity, and names of recipient charities that were sent or have not yet been sent donations or grants of recommended donations.

2. Required Disclosures
The new law will require charitable fundraising platforms to clearly disclose certain information, including: (1) a statement about who will receive the donations; (2) if applicable, a statement that a recipient charity may not receive donations or grants of recommended donations, with an explanation identifying the most pertinent reasons that a recipient charity may not receive the funds; (3) the maximum length of time it takes to send the donation or a grant of the recommended donation to a recipient charity, with an explanation of the time needed (unless the donation is sent contemporaneously to the recipient charity); (4) the fees or other amount, if any, deducted from or added to the donation or a grant of the recommended donation; and (5) a statement as to the tax deductibility of the donation. The new law permits some, but not all, of these disclosures to be provided through a conspicuous hyperlink, so long as the disclosure is conspicuous when the hyperlink is selected.

3. Written Consent of Charity Beneficiaries 
Charitable fundraising platforms must obtain affirmative written consent from a recipient charity before using its name in a solicitation.

4. Soliciting or Receiving Funds Only for Charities in Good Standing 
A charitable fundraising platform or platform charity may only facilitate solicitations or receive donations for charitable organizations in good standing.  “Good standing” means the platform charity or other recipient charity is not prohibited from soliciting or operating in the state.  

5. Segregation of Funds
Charitable fundraising platforms and platform charities must hold charitable funds raised in a separate account or accounts from other funds belonging to the platform or platform charity.

6. Prompt Distribution of Donations/Grants and Donation Tax Receipts 
Fundraising platforms and platform charities must promptly send donations to recipient charitable organizations with an accounting of any fees assessed for processing the funds, subject to any additional regulations that may be established by the Hawaii Attorney General (which would presumably define what time frame constitutes “promptly”).   Fundraising platforms and platform charities must also promptly provide a donation tax receipt to the donor.

Avoiding Duplicative Registration and Compliance Obligations  
Recognizing that some charitable fundraising platforms could meet the definition of professional solicitor and commercial co-venturer, the law provides the following clarifications to avoid such overlap. 

1. Professional Solicitor
If an entity meets the definition of both a professional solicitor and a charitable fundraising platform, it will only be a professional solicitor when the entity, for compensation, performs any of the following acts of solicitation. 

• Direct mail solicitation, excluding electronic mail or messages
• Estate gift or estate planning solicitation
• In-person solicitation through a fundraising event, door-to-door or other public spaces, or a vending machine or similar equipment that does not use a person to perform the solicitation
• Noncash solicitation
• Nonincidental acts of solicitation that are not internet-based, including solicitation through print, radio, or television
• Solicitation involving receiving something of value, or a chance to win something of value, in connection with a donation
• Telephone solicitation
  
  

2. Commercial Co-venturer
An entity that meets the definition of both a commercial co-venturer and a charitable fundraising platform will be only a commercial co-venturer when the acts of solicitation through an internet website, service, or other platform to persons in the state are for six (6) or fewer recipient charities per calendar year.   Entities that conduct online charitable sales promotions for seven (7) or more recipient charities per calendar year will be regulated as charitable fundraising platforms.

The Recent Amendments
The recent amendments made a few key changes, including (a) eliminating state or federal tax-exempt status from the definition of “good standing;” (b) eliminating the imposition of vicarious liability on a platform charity for any misuse of funds by its partnering charitable fundraising platform; (c) eliminating the extension of certain provisions applicable to professional fundraisers (e.g., filing of contracts with charitable organizations; deposit of funds into a charitable organization’s bank account within 5 days of receipt); and (d) clarifying which regulations an entity is subject to if it meets the definition of both a commercial co-venturer and charitable fundraising platform. 

Key Differences from California’s Fundraising Platform Law
While Hawaii’s charitable fundraising platform law is modeled after California’s law, it differs in a couple of notable ways that make it both less and more burdensome.

1. Definition of “Good Standing”
Whereas California defines “good standing” to mean the platform charity or other recipient charity’s tax-exempt status has not been revoked by the Internal Revenue Service or the California Franchise Tax Board, or is not prohibited from soliciting or operating in California by the Attorney General; Hawaii’s definition of “good standing” (as recently amended) only includes organizations that the Attorney General has not prohibited from soliciting or operating in the state.  

While it is still to be seen how broadly or narrowly Hawaii will implement its good standing definition (read about the harsh consequences of California’s regulatory approach), Hawaii’s simpler definition should minimize the number of organizations that fundraising platforms must block from receiving donations. 

2. Written Consent
Unlike California’s law, which provides a limited exception when written consent is not required from a recipient charity if specific procedures are followed, Hawaii mandates charitable fundraising platforms to obtain affirmative written consent from any recipient charitable organization before including it on their platform. This difference in the approach to written consent will particularly impact fundraising platforms that facilitate donations to an extensive list of organizations where the benefiting organization is chosen by the donor/purchaser/user/peer-to-peer fundraiser (e.g., “choose from any of 1+ million charitable organizations to support”). In these platform structures, donations are typically first received by a platform charity, which then makes a grant to the selected recipient charity.  

To better understand how Hawaii’s charitable fundraising platform law compares to California’s, please read California Enacts New Law to Regulate Charitable Fundraising Platforms, which summarizes the key components of California’s law.

The Hawaii Attorney General has yet to publish registration and reporting forms for charitable fundraising platforms and platform charities, or rules implementing the new law. Stay tuned for further updates.

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